Prada looks to buoyant mainland growth amid plans for more stores

Italian fashion house Prada expects to post a profit of at least Euro150.7 million (HK$1.69 billion) for the first half of this year.

The company also plans to add 80 directly run stores globally by January next year, according to a filing with the Hong Kong stock exchange yesterday.

The Milan-based company, which is seeking an initial public offering in Hong Kong to raise about US$2 billion, said there was still 'substantial potential' for growth in the Asia-Pacific, particularly in China.

It intends to open about 70 directly operated stores in Asia in the three financial years to January 2014, with 30 on the mainland.

'We believe further growth is possible due to continuing growth of the Chinese economy, which enables us to further our penetration into more Chinese cities,' Prada said in the prospectus.

The company also hopes to enhance its presence in rapidly growing markets in the Middle East, South America and eastern Europe.

Prada, which also owns the Miu Miu, Car Shoe and Church's brands, will be the first global luxury brand to list in Hong Kong. It plans to sell 423.3 million shares in the offering. The shares will be priced on June 17 and list on the Hong Kong exchange on June 24, Reuters said, citing a term sheet of the offering.

The company reported a net profit of Euro250 million for the past financial year, more than double that of the previous year.

The Asia-Pacific is the fastest growing market in Prada's global strategy with a compound annual growth rate as high as 51 per cent in the past two financial years.

By contrast, growth in Europe, North America and Japan remained from 0.8 to 8.7 per cent for the period.

The Asia-Pacific region generates 32 per cent of the company's revenue, while Europe and North America contribute 22.3 and 14.6 per cent, respectively.

Prada's chief financial officer Donatello Galli was quoted by the Hong Kong Economic Times that Chinese consumers' spending, both domestically and overseas, amounted to 30 per cent of its total sales last year.

At the end of January, Prada had 319 directly operated stores compared with 211 three years ago. In addition, it also runs a wholesale business which accounts for 30 per cent of its revenue.

Miu Miu is another business focus in the company's blueprint. It said 35 per cent of Miu Miu's net sales originated from the Asia-Pacific, reflecting the fashion-forward products under the brand are well received by Asian consumers.

The company will raise the number of shops in the Asia-Pacific to 55 from 25 over the next three financial years.

As well as increasing 'significantly' investment in marketing and communications, Prada also plans to host a Miu Miu fashion show in Shanghai this year 'to enhance its growing brand recognition in Asia'.

In addition to Prada, several big brands including luggage maker Samsonite International, Coach and Burberry have planned or shown interest in selling shares in Hong Kong.

32%

The share of Prada's revenue generated from sales in the Asia-Pacific, the company's fastest-growing market